Storm over the oil industry

Financial Times: Storm over the oil industry

In one company, Shell, the recruitment problems go all the way to the top: analysts think that Europe’s second biggest energy group – which had a reputation as a training ground for the industry’s brightest – lacks qualified candidates eventually to fill top rank posts such as chief executive and head of exploration and production. Concern over filling such posts is seen as a drag on the company’s share price

Posted Wednesday 31 August 2005

EXTRACTS FROM ARTICLE

Getting people to work on a large project is difficult if the skills that are required are specialised or the location remote, as Royal Dutch Shell recently found. The cost of its gas project at Sakhalin Island, off the east coast of Russia, has ballooned to $20bn – twice the original estimate. The group says the rising price of services and raw materials are in large part to blame.

Shell’s other mammoth projects, in Nigeria and Canada, have also been hit by rising costs. It recently warned that the cost of expanding its oilsands project at Athabasca, in the Canadian province of Alberta, was set to climb. “It is clear that there is a significant upward trend in construction costs due to the heated global market for engineered equipment and bulk materials,” Shell Canada said. There are also indications that the company’s Pearl Gas-to-liquids project in Qatar is rising in cost. In the light of the cost overruns, Shell is reviewing its capital expenditure budgets, which could rise from the expected $15bn a year.

Royal Dutch Shell, the Anglo-Dutch energy group, and other companies in Louisiana are finding recruits for their on- and offshore rigs among young high school drop-outs. In June, the first seven students graduated from a programme of the American Petroleum Institute, the industry association, and Jobs Corp, an education and vocational training programme administered by the US Department of Labor, which trains students in safety and well operations and helps them to complete their high school equivalency exam.

Meanwhile, the vilification of oil companies by environmental and human rights groups has made an industry career less appealing for those with more skills, oil company executives say. BP alone has hired 13 search agencies to fill 400 vacancies at its Houston-based operations.

Even places such as Angola – which emerged only this decade from 27 years of civil war – are being trawled by some companies operating there for talent to fill top jobs.

In one company, Shell, the recruitment problems go all the way to the top: analysts think that Europe’s second biggest energy group – which had a reputation as a training ground for the industry’s brightest – lacks qualified candidates eventually to fill top rank posts such as chief executive and head of exploration and production. Concern over filling such posts is seen as a drag on the company’s share price.

FULL ARTICLE

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